CitiFinancial to Pay $1.25 Million Penalty for Failing to Report Loans

State regulators announced a ""35-state settlement agreement"":http://www.csbs.org/AM/Template.cfm?Section=Press_Releases&CONTENTID=26919&TEMPLATE=/CM/ContentDisplay.cfm with ""CitiFinancial"":http://www.citifinancial.com/USCFA/CFA/portal/Home.do on Wednesday, after a

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recent examination conducted by the ""Massachusetts Division of Banks"":http://www.mass.gov/?pageID=ocaagencylanding&L=4&L0=Home&L1=Government&L2=Our+Agencies+and+Divisions&L3=Division+of+Banks&sid=Eoca found that the company failed to report 91,127 residential mortgage loans to the federal government as required by the Home Mortgage Disclosure Act (HMDA).

Under the settlement, CitiFinancial has agreed to pay a penalty totaling $1.25 million to the 35 states that are party to the agreement.

The loans that were omitted from CitiFinancial's HMDA Loan Application Register were originated between 2004 and 2007. The failure to report the loans was apparently caused by an internal systems error at the company that

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went undetected until the Massachusetts Division of Banks' examination.

""HMDA remains the primary tool we utilize to ensure compliance with fair lending laws and regulations,"" said Steven L. Antonakes, Massachusetts Commissioner of Banks. ""By failing to accurately report all required transactions, CitiFinancial hampered our ability to complete that assessment.""

In addition to paying a penalty, CitiFinancial has already resubmitted corrected and complete HMDA reports to the Federal Reserve system for the years of 2004 through 2007, and it has agreed to engage an independent consultant to conduct a thorough fair lending review to ensure the data from the previously unreported 91,127 mortgage transactions does not in any way demonstrate a pattern or practice of discriminatory lending practices.

Furthermore, the company said it will thoroughly review and substantially modify its internal control procedures to ensure all reportable HMDA transactions are accurately compiled and reported.

Mark Pearce, president of the ""American Association of Residential Mortgage Regulators"":http://www.aarmr.org/ and chief deputy commissioner of the North Carolina Office of Commissioner of Banks, said this settlement highlights the value of state enforcement of federal consumer protection laws and demonstrates the ability of state regulators to work together effectively to address systemic compliance concerns with a large national lender.